How to Create and Write a Financial Plan
Future Financial Position Determination
After you have determined your current financial position you should embark on identifying the future position you want to reach as regards to finances.
In order to accomplish this you should set clear and specific goals. These should be set in such a way that can be objectively measured against certain criteria. The goals you set should be directed to one-year, three-year, five-year and long-term objective achievement.
You should by all means set up an emergency plan, which takes under consideration any mishaps that are likely to happen in the future. It represents an insurance that will cover emergency expenses.
In order to set your future financial goals you should repay the accumulated debt on your credit card account. Additionally, you should make the necessary installments required for the full coverage of any mortgages you have.
In case your employer offers a company-sponsored retirement plan, participate in it and try to maximize the contributions you make. Otherwise, consider the possibility of opening an independent retirement plan. A good alternative is the establishment of an IRA account. You should also think of the education expenses of your children and include a fund that will meet these needs.
You should make sure that you minimize the income that is subject to taxes and check whether you have sufficiently diversified your investments.
Set yourself as a goal the achievement of financial independence at a certain age and do your best to accomplish this goal.
Financial Plan Establishment
After determining where you want to be regarding your finances, you should draw a plan on how to reach this position.
You should start by setting up a liquid emergency fund. Next you should embark on the repayment of any debt you have incurred such as debt on your credit card account.
No matter how unpleasant it may be, the design of your will is a must-do that you should execute so that you are sure that your resources will go in the right hands.
Another component of your financial plan is the retirement plan. You can set it by your company if it provides such. Other alternatives are IRAs and their variations and Keogh profit sharing, where contributions are mandatory. Additionally, you can set a money purchase plan or a SEP (Simplified Employee Pension).
The next component in your financial plan is the establishment of a fund on behalf of your children that meets their education needs. You should start contributing money to it every month, so that you accumulate the necessary amount.
If you haven't started investing yet, determine in your plan the beginning of such activities. A final component of the financial plan that should be included when designing it is the design of a budget. This is necessary so that you can plan on your money more efficiently and keep track of your expenses so that you can avoid future shortfalls.
Financial Plan Implementation
The next step toward ensuring your proximity to the predetermined financial goals is the implementation of the plan you have designed to serve your needs. You should stick to it and track both your income and expenses. Spreadsheets, budget forms or other computer programs may greatly facilitate your work during the implementation of the financial plan.
As part of the implementation of your financial plan you should embark on the different investment opportunities, but only after you have done the necessary preliminary research. You should keep in mind the level of risk you are willing and able to accept and use the services of brokers whenever you don't feel comfortable with your financial knowledge. Try to find a one who charges reasonable low fees.
Financial Plan Monitoring
Your budget should be applied as milestone toward which an evaluation on the progress of your goal achievement is made. In case you make substantial deviations from the pre-set financial plan, you should do the necessary adjustments in your spending. Finally, the monitoring of your plan includes the regular (recommended monthly) review of your Net Worth Statement in order to make the necessary updates.
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